welcome back to another hour of "squawk on the street." i'm carl quintanilla along with sara eisen jpmorgan's head of global research, joyce chang with us. u.s. house speaker kevin mccarthy pitching spending cuts to wall street right here at the new york stock exchange. we'll speak with fpeter orzag. banks getting hit on the back of their results. m&b, charles schwab in the

green. stocks losing some early morning gains. we're lower across the board, nothing extreme. treasury also selling off and the dollar is rising the s&p 500, little change topping the tape for us, bullish numbers for investors to digest. bank of america saying the earnings picture it looking good 90% of companies have beat on earnings, the highest post-one week surprise statistic in at least 20 years yes, it is very early into earnings season. the percentage of up days of the past 20 reaching 65%, the highest since november 2021. manufacturing activity in the new york region turned positive for the first time since november that new york fed manufacturing reports also showing lower prices both paid and expected, which is a good sign on the disinflation story as well potential sign manufacturing is bottoming out. at least in the new york region. >> prices paid, they were at 41, they go to 33, which is below

50, yet yields climbed on that report because we were looking for a negative headline and didn't get it. >> better manufacturing. markets in this weird, be careful what you wish for on inflation. if inflation comes down, it means demand is weakening and we have to wonder if we're going into recession everyone is focused on how the fed will interpret it. 90% odds that the fed raises rates in may 25 basis points and then is done the biggest question is, do they cut this year in july and september as the market is starting to price in that, i think, has helped the stock market overall, this idea that the fed is going to have to adjust it's not going to stay high for long, despite what they're saying about that. >> right look at yellen's comments over the weekend about credit tightening >> helped some. >> and got echoed by lagarde over the weekend. >> things are looking good european blue chip stocks are the highest level since 2007 things have looked better. the resilience theme continues

on the economy, where we're all sort of trying to figure out what's going to happen with bank lending and is there going to be a credit crunch and is that going to lead to a deeper recession. every day it feels like the market goes back and forth on this point i think the jamie dimon/jpmorgan stock move and what he said about the economy went a long way to making people feel better about that and potentially inside the fed, too. we haven't heard a lot of alarm about the banking system. >> true. our next guest calling the global economic expansion, quote, unsustainable, telling investors to avoid tech, hold with dividends it's our pleasure to have jpmorgan's head of global research joyce chang unsustainable meaning we're in for trouble or don't rely on past rhyming for too long? >> the timing is hard. people saying, is it 18 months three to six months, it doesn't look like there's going to be a recession, but in 18 months,

that's a different question. and i think actually the message from policymakers was, higher for longer yes, we're ready to pause and assess where we're at. i saw very few investors or policymakers really believing there's going to be fed easing in the second half of the year i think, you know, what the 60 basis points of easing that's being priced into the market is reflecting right now is, you know, is there a 10 or 15% chance of some real financial instability that could play out? that's really what stood out from the meetings we had in washington last week concerns about the speed of financial instability that played out in the regional banking crisis, a repeat of what we saw with uk, ldi last year. but the labor market is tight. households are in good shape corporate balance sheets are in good shape but there is a sense that this cost of capital is going to feed through over the longer term. >> the house speaker kevin mccarthy is here at the stock exchange hopefully we'll get to talk to

him in a few minutes opening this conversation about the debt ceiling, how concerned are your clients and what are you telling them >> look, the debt ceiling along with geopolitical risks were top of mind with investors and there were real fears that could we see something that is even more acrimonious than we saw in 2011 on the debt ceiling? when we had some of the speakers who talked about the possibility of a technical default, i mean, some of them had put it at 10 to even 35%, something that could be resolved pretty quickly, but wondering if this really was a risk and there would be brinksmanship. i don't believe the market will focus on this for two to three months before the x date but there is a question on where the x date will be this is definitely top of mind i think very strong messaging from all of the policymakers in washington, d.c., that, you know, just what the consequences would be of a technical default. ratings downgrades and other fallout to come. >> this is one of those

interesting moments where we're having a discussion about the issue and the players. and we just happen to have house speaker mccarthy here. >> where did you come from >> i just walked on the floor, thought i would stop by. >> welcome good to have you. >> thank you. >> what was your message upstairs and how do you think markets should be responding to it right now >> afebruary 1st i sat down with this president and i said, let's work together to be able to deal with the debt ceiling and our economy at the same time the same thing we've done in the past, as you've mentioned. for 75 days he's ignored us. i want to find a responsible, sensible way to do this. my message upstairs is if the president won't pay attention to this, if he doesn't believe he can find one dollar in savings, republicans in the next couple of weeks will act and send a debt ceiling increase that will limit, save and grow that will help us on economics, growth in this country, will cap spending in the future, will pull back, claw back the money we appropriated for covid that

has sat dormant for two years. if it was appropriate to help you in covid and you haven't spent it, it shouldn't be spent afterwards find ways to save the taxpayer money, grow the economy, become less dependent on china, curb our spending in the future to curb inflation to help every family that's sensible and responsible. we moved the debt ceiling into next year. if the president doesn't want to take action, we'll send it to the senate. >> there's an appropriations committee and budget for all of this the fiscal year ends in september. why not deal with spending cuts and negotiate with the president there? why negotiate over the debt ceiling, which is much more dangerous? >> it's not dangerous at all, especially when you sit down on february 1st the budget is different than a debt ceiling it's not like a state capital. the budget never goes to the president. for the president to do a budget doesn't make sense you want to sit down with the debt ceiling, just as america has done when president biden was

senator, four times he voted to increase debt ceiling only if it included fiscal changes. the only time he voted against it was because he said there wasn't enough fiscal change. a debt ceiling is like giving your child a credit card and they charge the limit all the way up would you raise the limit? >> if it meant with america standing in full faith and credit of u.s. government debt, i feeling like you can deal with the spending in other ways, which is totally legitimate. >> if you just raise the debt, do you think $31 trillion of debt, the cbo has come out in the next ten years, we'll pay 3.5 -- >> you did it three times in the trump administration. >> as we did economic changes. we never raised the debt ceiling -- >> but the tax cuts that was like $2 trillion. >> and you know how much we're bringing in in revenue on average in the 50-year average in america you bring 17% of gdp today we're bringing 20% that's only two other times in modern history in america have you ever brought 20% of gdp. that's because the tax cuts actually created the economy to grow and brought more revenue

into the economy but the problem is not how much money we're bringing in where the president just wants to raise more taxes, it's our spending on 50-year average we normally only spend 21% of gdp. right now we're spending 23.6, on our way to 25%. if you don't tackle the spending problem, you never if you ignore this problem and you just raise the debt ceiling, our debt is now $31 trillion it's bigger than our entire economy by 20% you're at a tipping point. all you're going to do is cause more inflation remember what milton freeman, my first economist said, inflation is only created in washington. the only way you curve inflation is you create the interest rate to be higher than the inflation rate we've already had bank failures based upon this policy where the democrats spent $6 trillion more our history has always been that we did not just raise the debt ceiling. president biden every time did not believe in that. i don't know why you want to change it now when we're more in

economic dire straits. if you did what you're requesting, you would create more inflation, more dependency on china, you would harm social security and medicare. for the first time in a ten-year window, three trust funds will go insolvent infrastructure - >> i'm not suggesting we don't do anything about it i'm just saying -- >> the time -- >> this is a technical - >> the time and place is right now, just as we've watched every time before. i didn't wait until the last moment i went in february 1st and i think the responsible thing to do, our government is designed to find compromise. i'm not sitting here and saying, mr. president, have you to do this i think everybody in america realizes we should spend less than we spent before we should find ways to grow and save and limit our growth. >> so, then, what do you say to those who wonder, cut what we've watched debates about social security and medicare and today s.n.a.p. looking for unanimity in the gop on that

alone. where do you find cuts >> i don't call them cuts, i call them savings. under discretionary spending increased by 31% this is more than inflation and gdp. this is what created inflation, okay we are elected as elected official, we should make decisions where we spend our money like every single family we'll prioritize where they should go. we have a supply chain problem president biden when he was a senator, he voted for work requirements now, this is only for able-bodied people with no dependents it helps them get back in the workforce. we have more job openings than people are looking for jobs. if you want to curve inflation down, you want to get the supply chain better, help people get back into the workforce. that's exactly what this will do it's -- it's a hand up, all right? so, i believe -- i want to knock down the barriers. the other place, claw back the money you've appropriated that

hasn't been spent and is useless. then invest in american economy. our energy of what we need cut the red tape so we can build things again in america. that's the permitting reform we just passed that was on a bipartisan level i don't think this is draconian. i think this helps. >> upstairs you also said on the fed, had they acted earlier we wouldn't be in this situation. >> that's true. >> is there some blame to be spread around to the fed >> the first blame is how did inflation get created? milton freeman tells you inflation only gets created in washington it was the $6 trillion even democrats tell you, it is the immoral sin of when they -- when the democrats passed their covid bill that created the inflation, the extra $2 trillion so, that is a creator, but the fed, had they acted faster, you could have stopped the rise of inflation. >> so, are you -- do you actually have your house members, your party on board with what you're proposing today? because there are a number of

republicans that don't want to raise the debt ceiling you should any circumstance, right you have a pretty thin margin. >> five seats. >> five seats. >> i don't know if you watched my speaker -- it was close. >> that's what i'm asking. do you have the support of your party for what you're asking >> i think i have the support of america. i'll get the party behind it more importantly, what is wrong with sitting down on both sides and finding a responsible, reasonable way who in america wants to continue down this path where we spend more than we bring in? that we're leveraging our children's future, we're creating inflation, that the disruption that's happening today, our own allies are going to china there's an attack on the dollar. and you know what, what brazil and these other countries do won't knock the dollar off the world currency it's what we do. if we continue to have a debt at 120%, we will crumble. so, what i'm standing up for is the future of this country this is the time, this is the place, and this is the moment. and everybody can have a say in

it, but i think the common sense, sensible, rational thing to do is exactly what republicans are going to do. you know what, we welcome democrats to join with us, just as they joined with us on our energy bill. >> even if you cobble together the votes in the house, then it goes to the senate then what this is. >> it's their responsibility. >> what's the realistic chance of your proposal passing the senate >> i think the same realistic plan when we told the district of columbia they can't decriminalize carjacking and murder and the president signed it it's the same when we said the pandemic was over and the president said he would veto it and he signed it last week if i rely on based on opportunity, i shouldn't have to worry about that i should stand up for the american public, work within congress and listen to the senate it's not my fault they don't do their job. i haven't seen them do much this year i'd like them to. >> finally, mr. speaker, if the u.s. faces downgrade from the major ratings agencies, what would be your response

not my fault not our fault? >> i want to make sure that day never comes. that's why i'm here today. that's why in the next two weeks we'll acted, as you talk about, this is a couple months away why do we have to wait until a deadline to act? and you're sitting, talking to the speaker of the house who telling you he's going to act. has the senator done anything? if the add vocation on the other side is to pass a clean debt ceiling, has the senate passed that yet would it pass? has the president proposed it? what have they done to find savings? the only thing the president said is they want to raise taxes. inside his budget they propose to raise taxes to spend more money than we did at the height of the pandemic. that makes no sense. >> i was going to ask you about taxes. you want -- you want to extend the trump tax cuts, correct? >> yes. >> isn't that a little hypocritical when you're talking about findings savings everywhere and being on an unsustainable fiscal path? >> how is that hypocritical -- >> tax cuts, tax savings

>> really? you're sitting on the market, you're sitting where the future goes, where people make an investment so, will this actually be able to go public if they have more regulation and higher taxes? >> i get the argument for it. >> you know what happens on this floor? people make an investment and it pays for their pension make make an investment to pay for their kids' education. you know why these companies come here? because this is the place to grow but right now we're finding with competition, with higher taxes, with higher burdensome that they're not always coming to this market. yes, i will always advocate for the idea that we are streamlining our tax policies, that we're also streamlining our regulation so america is the place you want to start that business. >> is that why you're here today? people are wondering - >> i did this when i was 20 years old and i found out three lessons, right i was the first to work, last to leave and last to be paid. but we created jobs. it actually paid my way through

college. it determined something even greater, right i actually applied for an internship with my local congressman and was turned down. today i sit as the speaker of the house to a seat i couldn't get an internship for. i'm not going to give up i'm not going to make a decision on whether somebody else is going to act i'm going to act in the best interest of america and for our future children. i think being here, talking about this problem, which the president has ignored for 75 days, is the right place to be at the right time. >> speaker mccarthy, thank you for taking the time. >> thank you an honor. >> thank you. >> we got a lot more we'll get reaction from joyce chang from jpmorgan on the set on the other side of this break. plus, former director of omb peter orszag is with us and reacting to comments from the speaker when we're back in two from big cities, to small towns, and on main streets across the us, you'll find pnc bank. helping businesses both large and small, communities and the people who live and work there

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choice chang of jpmorgan is with us on set having witnessed our impromptu conversation with the house speaker. your thoughts and your view on when the market think this is in the living room. >> we think the x date is around the middle of august, around september. we'll get more news when we actually look at the tax receipts could it actually be earlier in july let's just say it's around september. the market will begin to focus on this two to three months beforehand you see treasuries with

maturities around those dates, do you see more action on that front, more funds that go into money market funds but i think, you know, the concern really is that you have a number of new members in the house republicans who haven't voted on a debt ceiling before what we can see is that the two sides have not laid out the issues now, this is often resolved at the last moment, brinksmanship in the last hour, but we have seen rating agencies seem more inclined to downgrade on the banks earlier than what we had seen previously. so, i think that the market hasn't priced this in. it's probably two to three months before the x date, which we'll have more clarity on in the next couple of weeks but you have just that the -- the margin that we talked about in the house is going to make this, i think, very acrimonious. we don't have clear proposals that have been put out yet. >> if, in fact, moody's or fitch puts the u.s. on a downgrade watch or an actual downgrade, i guess it depends on how far it

gets, what is that work to stocks, do you think 10%? >> that's certainly not priced in at this point in our last investor survey, 31% of investors we surveyed think global equities could be among the lowest performing instruments this year, or asset class this year. i think that, you know, this issue is going to become top of mind probably by the early summer you know, not right now. but i think it's very important that everybody starts to watch this issue, but it's the margins and the brinksmanship and we haven't seen very clear proposals here so, i think that this could be something that much like, you know, what we've seen in 2011, in other dilemmas around the debt ceiling where you do start to have the market move much more than what we have seen so far, but it's in the discussion right now. when we did our investor survey last week, we found that -- the surprises out of the meetings we

had out of washington, d.c., were how little had actually been done to move this issue forward. >> i was going to say, just listening to the house speaker, my impression is that it's going to be really hard, right, whether he can get his own party on board when asked about whether the senate, not really my issue, right, and the president's not negotiatingings because the president thinks it's a budget issue and you can negotiate then everybody is so far apart. i'm not sure how it gets resolved what did you make of his comments >> i think it's going to brinksmanship but some of these work-arounds we all hear about, debt prioritization, can you do a discharge position some of these would have to start right now. if you look at the number of days that has to be on the legislative floor. i think it is back to brinksmanship in the final hour again. and, you know, if you actually then have to look at where would you cut expenditures, you actually end up starting with a lot of the military expenditures first being cut from the agencies it will raise more questions

also on what the revenue collection will look like. there's ambitious targets by the irs in the projections top of mind, debt sustainability is back to being top of mind right now. and, you know, the increase in the debt burden that we have seen, you know, because of the pandemic has meant that, you know, zero yields, everybody was kind of pushing this out now it is back top of mind as a source of financial instability. >> you can say that again. yeah, remarkable how it went away as a priority for several years. joyce, i mean, kind of fit with your sector outlook, even though a much different conversation than we expected thank you. >> thank you so much for having me. >> you never know what's going to happen here. let's get back to a big story of the day, the banks, the kbw regional bank index hitting the lowest level in two years. a little higher today, up 0.4% but we haven't seen much of a bounce m&t beating estimates on top and

bottom lines the stock rebounding what's been a volatile morning charles schwab moving higher, despite pausing its buyback program thanks to recent uncertainty in the banking system, citing uncertainty over regulations. state street sinking on the back of a miss for both earnings and revenue. joining us is cfra analyst alexander yocum. broadly, what message are you getting from the regional, more troubled banks here? >> yeah. i think friday gave us a lot of information. so, if you think about it, we saw the four large banks report on friday. that's about a third of the deposits in the entire banking industry their deposits were about flat, which means that the rest of the banking industry, the rest two-thirds is going to have to account for that 500-plus deposit billion outflows we saw m&t today, about 3% down in deposits. for other regional banks we could potentially see larger declines so, that's probably one of the

main things to watch for >> but isn't that sort of -- i hate the word transitory now, but isn't that a temporary issue if deposit flows have sta stabilized, as we've been told by treasury and the fed right now going forward? or do you still think it's going to be a big driver >> i think it will be a big driver for this quarter because we don't know which banks are going to miss on deposits. the banks that do miss on deposits significantly, they'll likely see their net interest margins compress significantly and, therefore, their profitability will be down you saw pnc on friday. their deposits were flat but even they had net interest margin compression m&t bank also had compression whereas the large banks saw expansion in the first quarter that's probably one thing that's leading to a little bit of the underperformance as of late. >> i wonder what you also made of the loan growth numbers friday night in banks both large and small and whether or not that was net encouraging as we're watching for any kinds of

shrinkage in loan growth. >> yes, i did look at that that was encouraging before that they had actually looked pretty bad. it had looked like loan growth was coming down pretty significantly. that was definitely encouraging. in general, i am definitely expecting lower loan growth for the rest of the year than we would have said a month or two ago, especially for banks that do have those significant deposit outlflows. they get less flexibility and they don't want to run out of deposits like silicon valley bank for banks like that, i would expect them to cut back on their loans. >> there has been some work done on barclay's, for example, argues is an additional wave of outflows as they -- they call them sleepy depositors who basically read the paper one day and say, i'm getting cheated out of a much better rate somewhere else do you think that's likely >> yeah, but that would be a slow decline we did see that last year so that was a percent or so outflow

where this quarter we'll see a lot more than that this quarter it will probably return to 1% a quarter deposit outflows and then, you know, if banks don't want that to happen, if they're running out of deposits, they'll have to increase that rate they pay on deposits and that will impact profitability i would just say that because bank multiples are down so much, a lot of these banks are trading at march 2020 levels, so think peak pandemic, for banks that don't see a big hit to profitability or banks that don't see significant deposit outflows, especially regionals, they could pop on earnings like you're seeing today with m&t. >> and schwab, which is notable, 2.7% higher, cramer says the bears need to break this it is higher right now so, is it all just about earnings pressure going forward, or have we -- have the regulators eliminated the risk of another blowup like we've seen with svb? >> yeah, so i do think it's mostly about profitability going forward. you've seen the volatility in

bank stocks has really come down after that initial week where we saw extreme volatility as you mentioned, the kre is not really recovering. there is still concern but it's less about solvency and more about profitability. >> got it. alexander, thank you very much >> thank you as we continue to get more bank earnings this week, we'll talk to pnc ceo bill demchak, one of the super regionals their stock was all over the place when they reported on friday. tight range, s&p down four points let's get a news update with contessa brewer. a delaware judge has delayed the start of dominion's defamation trial against fox news fox reportedly is pursuing a settlement dominion is suing the media giant over the way the network covered the 2020 presidential election, especially its machines. a court in moscow sentenced a leading critic of vladimir putin to 25 years in prison today. in a statement last week, the

critic said he's proud of standing up to putin's dictatorship he was convicted on charges of treason and denigrating the russian military. and the "phantom of the opera" took its final bow last night after a record-breaking 35-year run on broadway. andrew lloyd webber's mega hit played almost 14,000 performances to audiences of more than 20 million people. for anyone who got to see it on broadway, lucky you. carl >> wilfred frost, favorite show ever only saw it 100,000 times. thank you. after the break, rent prices seeing their first annual drop since the pandemic began we'll have more on what that means for the next batch of inflation data we're back after a moment. the dow was positive but it's tentative. up about four points the s&p still negative thinkorswim® by td ameritrade is more than a trading platform.

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this shift to the higher cost of funds is going to press the revenue for the next few quarters i made fun of my mother calling me saying, i'm pulling my money out of savings and putting it into treasuries, a lot of people are doing that elsewhere, energy a big mover in the last couple of weeks oil kind of moved dramatically from the end of march. we were in the 60s, it went into the 80s on oil ess was a monster, 122 at the end of march, went to 150. starting to run out of steam as push in oil about as far as you possibly can this was a very big leadership group here finally, i want to show you what's going on with the consumer names we're looking for new highs. you think 1% on the s&p 500, we get a whole bunch of new highs it's basically a small smattering of consumer stocks. mcdonald's, flat on the day. it was $270 three, four weeks ago, went to $289. it was a huge mover on the upside all of these consumer names,

autozone, boston scientific, some of the other ones out there, all doing a little bit better here. health care and defensive stocks, consumer staples that have been holding up the markets. guys, back to you. >> bob, talk in a bit. let's turn to notes we're watching we'll start on the housing front. according to new data from redfin, rent posting the first annual decline in three years. austin, texas, new orleans, chicago with the biggest declines inflation, recession fears causing rental demand to pull back a surplus in supply following the home building explosion we saw during the pandemic. let's bring in diana olick to talk about that. there are also stories about developers in houston and dallas who may be overshot when rates were at zero >> yeah. look, there is just a ton of multifamily apartment product coming on the market 1 million units currently under construction it's the highest level since the

mid-1980s. we're about to see a glut of mostly high-end apartment units coming onto the market that, of course, is going to decrease the pressure on rent prices and increase the vacancy rate because there's so many i want to point out, this headline we're negative year over year on rent, the redfin report skews much more i talked to the folks there, and it skews much more to the largely, professionally managed apartment buildings, ie, the higher end that's where we'll see rent come down the most. when you look at the single family rental market, rents are still up 5% year over year if you look at the mom and pop rentals, we're not seeing that big drop i would say, yes, rents are unquestionably easing from their highs, but they're not quite negative yet carl >> you know where they're not easing, in new york city >> no. >> rents keep going up i don't get it. >> what a shocker. you would think with all that new supply coming on demand is increasing in new york as well. it's interesting in areas like miami, we are seeing the sharpest decline in apartment

rentals. that had been one of the hottest markets. it's still, interestingly, one of the hottest home buying markets. you're seeing big sales there, big price increases on owner occupants. so see the rentals come down there, you have to wonder if that's a leading indicator on all of this. >> what's happening overall? are there still continued signs that activity has bottomed when it comes to sales and, i don't know, prices, i guess prices lag behind, but sales and overall activity >> well, we actually saw a really huge jump in existing home sales in january and february that's because we saw interest rates come down. mortgage rates pulled back they've been a little, can i say, fluxy in the last month or so, but definitely down off their highs. it's that affordability that's coming a little bit back into line it's still very, very pricey market, but prices are coming back a little bit. demand is jumping back in. the biggest problem overall entirely is lack of supply you saw it in a report from the home builders today is that the

home builders are now reporting, they have an over 33% share of the housing market historically, they should be about 10%. so, they're three times what they normally are in housing inventory because there is just nothing existing home wise for sale right now that's what's keeping sales down. >> there was some discussion about that nhb number and wondering if you'll be able to suppress it under 50 for a long time given how structurally underhoused we will be for years, right >> it's going to depend entirely on where people want to build. where do the builders build? mostly in the south and west and outside big cities the pandemic has changed a lot about where we want to live. we don't all want to live in the city as we did pre-pandemic. there was a big run on the cities interestingly where we're not seeing decline in rents or home prices is in the midwest midwestern cities, which, of course, have always been more affordable but places like cleveland, st. louis, columbus,

you're seeing people flock there for affordable there's not as much home building there again, if people want to move out into the outskirts, phoenix, las vegas, et cetera, it's been going past the pandemic where people are going to want to live >> diana, thank you. diana olick breaking down housing off that call. appreciate it. fed will like to see rents come down, fighting inflation. after the break, the former director of office management and budget, peter orszag weighs in on the battle over the debt ceiling. w o financial advisory at lazard and this isn't his first rodeo

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the problem is not the amount of money we're bringing in that the president wants to raise taxes. would he normally spend 20% of gdp, right now we're spending 23.6%, on our way to 25% if you ignore this problem and just raise the debt ceiling, our debt is now $31 trillion it's bigger than our entire economy by 20% you're at a tipping point. so, all you're going to do is cause more inflation >> that was house speaker kevin mccarthy here at post 9, just earlier in this hour in an impromptu interview about the debt ceiling fight he's at the new york stock exchange to talk about it. let's bring in lazard financial advisory, peter orszag not sure how much of the interview you saw, peter, but wondering how much deja vu you're having. >> a little too much, unfortunately.

we've been -- we've been through this too many times. >> so, what do you make of the republican and house speaker mccarthy's argument that this is the time to deal with spending i pushed him and said, look, there's an appropriations committee and a budget where you could do this. he said, no, they go back to that credit card analogy and raising the limit on your kid's credit card. >> well, i think the analogy isn't right. and i think your question was exactly the right one, which is there's a process for dealing with appropriations for the discretionary part of the budget and we could deal with that through the normal process there's no reason to continue to drive a car at high speed, you know, into a potential brick wall and brake right before the -- you know, right before hitting it, which is what we do over and over again. on the debt limit. i'd also just note, having read the speech and i tried to glance at the transcript of the interview, it's not clear what's even on the table. so, for example, there was a

mention of capping discretionary spending, but is that capping defense spending in addition to nondefense spending? what is it so, i think even in terms of actual proposal, let alone this not being the right format for t i'm not entirely clear what we're talking about. and this is particularly dangerous now because unlike, you know, previous rounds of this game, and it's a dangerous game, there have been concerns over the past few years about liquidity in the treasury market, which is lower than in the past that's a market where you never want to be playing game. we never wanted to play games in the past but more so today. >> it's also not clear that he has the support of his party, for whatever it is he's proposing. he said, i'll have the support of america so, where does this go what are you advisingyour clients to do? this is going to be an issue,

right, for the credit market, for financing, for the economy >> well, look, i think this is a moment of high volatility for the next few months. we've been signaling this as a concern for a while. i would note, i think even on cnbc, i had pointed out that we really should have taken care of this problem during the lame duck last year when the democrats controlled both houses of congress, but we're past that and this is just an added source of uncertainty and volatility for the economy, in addition to a potential credit crunch coming from tension and fissures in the banking system, all of which feeds into an argument that, frankly, the fed has moved too quickly on raising rates and it should move very cautiously moving forward given these very significant risks that are out there through basically the end of the summer. >> right

does that mean you think a pause right here is appropriate or can they sort of lean on the idea we're going to do what we said we're going to do and do one more 25? >> i would pause right now i actually would have paused on the last raise, too. i still think there's a fair amount of disinflation that is coming from the end of the pandemic that is underappreciated both on supply chains, which have now normalized, but their impact on inflation takes a while to play through. and then also we don't yet know what the full impact is, not only from this debt limit question, but also from the reverberations of a potential credit crunch, which can then play into concerns in commercial real estate. and this is one of these moments where you'd like to kind of see whether -- i think it's actually pretty clear that rates moved up too quickly. but see what the additional problems are before adding yet more fuel to that fire

>> on the flip side, peter, plenty of people think that the -- that inflation is sticky and that services, not just services, but in other parts of the economy, it's just not coming down fast enough. and there is a worry not just about the fed's credibility on this point, but just their ability to bring it down if they pause rate hikes without seeing enough evidence that it has come down >> well, i'd say a few things on that first, the most important point is that inflationary expectations remain really well anchored they have not moved up over the medium and long term so, that is the most important test of the fed's credibility. and ironically, the more the fed says it has to take inflation down immediately and then that doesn't happen, the more damage it's doing to its credibility. secondly, what we're seeing in the labor market is a very significant shift towards reducing the vacancy gap, which many people thought was impossible without, you know, a massive increakrcrease in

unemployment but it is happening and i think it would be beneficial to let that play out. sara, you may be right there may be more tightening required it doesn't mean you need to do it right. >> right he kind of painted himself into a corner when he said i would rather do it up front and not go back and tighten further just to button up the conversation on debt, because you're uniquely qualified as former omb director, what does a technical default look like? how do you game that out >> it's one of these things where i think it's a little dangerous to even game out in its full ugliness. there are -- there are proposals that are floating around for example, to pay interest and then roll over the principle on outstanding debt and then only pay whatever you can each day. i mean, it is a ridiculous situation for the world's leading economic power to be kind of on a daily cash basis

payment mechanism. i think that would significantly undermine our standing in the world. so, there's a lot of discussion about the various scenarios you could play through they're all bad, so let's just try to avoid being put in that situation in the first place. >> yeah. let's. peter orszag, thanks much. >> good to be with you. when we come back, will bing replace google as the default search engine on some smartphones? boosting microsoft at the open we'll get that story when ghk t see cesom rit back ns, and on main streets across the us, you'll find pnc bank. helping businesses both large and small, communities and the people who live and work there grow and thrive. we're proud to call these places home too. they're where we put down roots, and where together, we work to help move everyone's financial goals forward.

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alphabet shares under pressure this morning on the report that samsung considered replacing google as the default search engine on its phones. what a story >> yeah, it certainly brings back to the forefront this microsoft versus google that kicked off this year we are watching the stocks move in real time google has fallen behind and let microsoft steal its thunder. samsung was considering replacing google with microsoft's bing as the default search engine on its devices, which, by the way, run on google's an trdroid operating

system just the idea was enough to create panic at google because google pays billions of dollars of years to retain the dominant search engine on mobile, and some $3 billion to samsung and 20 billion to apple, which the contract is up for renewal the broader fear for investors is microsoft's lead in general a.i. through chat could disrupt google's search as one of the best lucrative business models in history >> ai is the most profound technology, more profound than fire or electricity or anything we have done in the past >> a shift that needs to be handled with caution, of course.

behind the scenes, google is building an all-new search engine, and microsoft is beating google at its own game and let's go back to the beginning of the year, and it's early and it's neck and neck in terms of the share price, and look at that they are both up nearly identical, about 19% this year >> can you connect the dots how the surf engine on smart phones relates to the a.i., and our search is just going to be like a chat gtp that kind of thing >> google had an insurmountable mo mote, and they wouldn't go to

www.google.com google is working slowly, and it's the core idea here and the core disruption that we would not go to google.com but bing.com because it has the jen rawtive a.i. capability. >> thank you >> all weekend, antidotes about how people are using chat -- >> they are dancing now. >> clearly wall street is buzzing about love this morning. netflix,ot oth nn e receiving end. we will explain, next. lily! welcome to our third bark-ery. oh, i can tell business is going through the “woof”. but seriously we need a reliable way to help keep everyone connected

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everyone is buzzing about our final story of the morning heartbreak for fans of the show "love is blind," blindsided after the live stream reunion was delayed for many

subscribers. netflix has an apology for members, and the company reporting after the bell tomorrow, not sure how material this is, but it's buzzing. >> there has been cautious commentary, i think. they were arguing there was no standout content hits to the quarter and maybe there will be cautious commentary on subs, and we don't know how the password thing is shaking out we will see. >> yeah, in terms of the street, it's the password sharing crackdown and they are bullish on that that it could add more users, and the model has been slow to get information and to see how many can convert and add in markets like the u.s. and canada >> a busy week on the media front. and then a smattering of financials tomorrow, goldman, and tesla this week as well.

>> schwaab is up and that's a tell because that was considered the next pwbig risky one. the stock reactions to me are the big thing here, because we have known there's a lot of bad news in here, but is the market going to be surprised by anything that is up, but we will continue to monitor the situation >> the market not treating financials as a unanimous unit let's get to the half. >> thank you very much welcome to the "halftime report." front and center this hour, the best start to earnings in a decade sit enough to keep stocks moving higher as another critical week is under way we discuss and debate for the investment commit. brenda, joe terranova, jenny harrington, and joe with me. joe, yield